Policy Alert #104 | July 17, 2015

After long, fractious negotiations, world powers and Iran struck a historic deal on Tuesday to curb Iran’s nuclear program in exchange for billions of dollars in relief from  international sanctions. This Policy Alert examines reactions from China, India, Russia, South Korea, and Japan to the Iranian nuclear deal.

CHINA

Chinese media expressed cautious optimism for the nuclear deal and predicted a surge in trade between Iran and China as a result of the deal.

• Chinese Foreign Minister Wang Yi urged all parties involved in the Iranian nuclear deal to honor the promises they made in the landmark agreement. He added that the agreement could serve as a positive reference for the handling of other regional hot spots, including the Korean Peninsula nuclear issue.
• “China has always played a constructive part in resolving the decade-long dispute, had an objective, fair and responsible attitude toward the issue, and stood ready to work with other countries to uphold the international non-proliferation regime,” lauded the People’s Daily.
• China Daily reported that the agreement is expected to enable a revitalized, sanction-free Iran to boost trade and cooperation with China. An Huihou, a former Chinese ambassador to Egypt, said Iran has a strong desire to participate in China’s Silk Road initiatives amid Tehran’s ambitious plans to revive its economy.
• Li Shaoxian, an expert in Middle East studies at Ningxia University, said the reopening of the Iranian market would increase economic competition between China and Western countries.
• The People’s Daily urged the international community to “stay sober-minded, as the road leading up to an out-and-out settlement of the Iranian nuclear issue is no less challenging than the strenuous negotiating process.”

INDIA

Indian commentators expressed universal optimism that the Iran nuclear deal will yield positive outcomes for India’s economy and trade.

• The Economic Times predicted that the nuclear deal is “likely to be positive” for India in several ways. “India’s finances will improve because of a possible drop in oil prices, while the rupee may become less volatile…Various Indian companies with business links to Iran, which has the world’s fourth-largest oil reserve and second-largest gas reserve, may be revitalized by this deal.”
• “As the Middle East becomes more complex and demanding, India’s options in Central Asia and Afghanistan are likely to expand rapidly as Tehran’s isolation ends,” predicted C. Raja Mohan, distinguished fellow at the Observer Research Foundation in New Delhi. “Iran’s role as India’s gateway to Central Asia, amidst Pakistan’s reluctance to offer overland transit facilities, has already begun to acquire renewed salience for the Modi government.”
• “Iran is central to India’s plan for physical access to Central Asia and beyond,” wrote Dipanjan Roy Chadhury, Economic Times reporter. The lifting of sanctions against Iran will enable Indian firms to participate in road and rail projects connecting the Indian-built Chabahar port in Iran with the road India has built in Afghanistan.
• India’s exports to Iran are expected to catapult Iran to India’s top 10 export destinations from its current 24th position, according to Anupam Shah, chairman of the Engineering Export Promotion Council of India (EEPC). Shah pointed out that the Iran nuclear deal will also help improve India’s trade with the Middle East, which accounts for approximately seven per cent of the country’s total export shipments.
• India’s return to Iran faces some challenges, warned Times of India diplomatic editor  Indrani Bagchi. “Engagement with Iran came down while India enhanced ties with Iran’s rivals Saudi Arabia and Israel. Having balanced Iran and the U.S. all these years, New Delhi will now balance its relations with Tehran and Tel Aviv, and Tehran and Riyadh. Second, China’s a bigger player; Beijing’s pushed a high-speed rail project from Tehran to Isfahan and development of the Chabahar port on a scale and speed India will find impossible to match. Third, India has way fewer citizens working in Iran than it does in the Gulf emirates and Saudi Arabia.”

RUSSIA

Russian officials welcomed the agreement, while others questioned whether the deal will positively or negatively impact Russia’s struggling economy.

• Russian President Vladimir Putin welcomed the agreement, saying that “today the world has breathed a sigh of great relief,” while the Russian Foreign Ministry declared that “the political-diplomatic approach to solving the problem has prevailed, one that Russia had always defended,” and expressed hope that the agreement will strengthen the regime of nuclear non-proliferation.
• Radjab Safarov, director of the Russian Center for Modern Iran Studies, explained that besides energy, the cancelation of the sanctions would give Russian companies a series of opportunities in Iran in the fields of chemical industry, information technology, railroad construction and several other sectors of the economy.
• “Moscow sees the deal, which offers Iran relief from sanctions in exchange for curbing its nuclear program, as opening the way to selling Tehran missile defense systems and winning lucrative new nuclear energy contracts. However, the deal also creates uncertainty for Moscow as the reintroduction of Iranian oil onto world markets could push down global prices and cause further damage to Russia’s struggling economy, which is heavily dependent on oil exports,” reported the Moscow Times.
• Global intelligence firm Stratfor said this month the increase in Iranian oil reaching world markets could reduce Russia’s ability to use energy as a political weapon against Europe, which depends heavily on Russian supplies. “Russia’s influence in the Middle East is fading rapidly at the same time Europe is starting to wriggle out of Russia’s energy grip. And as Russia’s options are narrowing, U.S. options are multiplying in both the Middle East and Europe. This is an uncomfortable situation for Putin, for sure,” it said.

SOUTH KOREA

Commentary in South Korea stressed enhanced business opportunities for Korean companies in Iran while questioning whether the Iran nuclear deal could also be a path forward in resolving tensions on the Korean peninsula.

• A number of editorials called on Washington to play an active role in resolving the North Korea issue, while others warned that differences between Iran and North Korea warrant different solutions.
  • The Joongang Daily celebrated the Iranian nuclear deal as both a “political and economical boon” for Korea and emphasized the deal as an opportunity for the United States and South Korea to also address the North Korea issue. The editorial added, “Washington has been dragging its feet on the North Korean nuclear issue citing strategic patience.”
  • “After the Iran nuclear problem has been solved, only North Korea remains,” former Unification Minister Jeong Se-hyun said. “In order to draw North Korea into the international community – rather than leaving the task to China, which is not likely to do the bidding of the United States – South Korea has to step forward. And for this, a paradigm change in policy is needed from the South Korean government to resolve inter-Korean relations.”
  • “Unlike Iran, categorized at best as a ‘threshold nuclear state,’ North Korea has long been called a virtual nuclear power. Resource-rich Iran has suffered significantly from economic sanctions, but the impoverished North has little left to lose. Many countries can expect economic benefits from Teheran’s economic freedom, but Pyongyang offers few such incentives,” observed a Korea Timeseditorial. It opined, “The U.S. administration…has not much capacity left to start another nuclear bargaining marathon.”
• Korean companies welcomed the lifting of sanctions, eagerly seeking new trade opportunities in Iran.
  • Kim Sung-wook, head of the state-run Korea Trade Investment Promotion Agency’s (KOTRA) office in Tehran, noted that an increase in Iran’s oil production “would trigger demand for large-scale offshore oil rigs or shipbuilding, in which Korea has world-class skills.” Other promising export items to Iran include auto parts, home appliances (particularly refrigerators), and cosmetics, according to Hong Jeong-hwa, a researcher at the Korea International Trade Association (KITA).
  • An unidentified official from Korea’s finance ministry told the Korea Times even with the nuclear agreement, there must be follow-up measures and verification processes that will all take time to sort out before Korean companies resume doing business in Iran. The source stressed the government plans to keep close tabs on what measures will be taken, speculating that broad economic and financial sanctions may be lifted late this year.

JAPAN

Japanese editorials welcomed the deal with cautious optimism.

• The Japan Times reported several Japanese companies eyeing opportunities in Iran after the nuclear accord, including major resources developer Inpex Corp, plant engineering company Chiyoda Corp., as well as several automakers. It noted that some companies remain cautious, reflecting uncertainties on the road to lifting economic sanctions against Iran.
• “Obviously, it is too early to become overly optimistic, as the two nations have only just started chipping away at their decades-long structure of confrontation. But this is all the more reason why international solidarity is indispensable to keeping the momentum going,” wrote an Asahi Shimbun editorial.

The Rising Powers Initiative Policy Alert project identifies and tracks the world views of major and aspiring powers in Asia and Eurasia. This project is supported by a grant from the Carnegie Corporation of New York.